Telecom mergers to increase, report says

Most technology executives in a new survey say they plan to participate in mergers and acquisitions in the near future, but few say they have clear integration strategies.

January 2, 20024:43 PM PST

Most technology executives in a new survey said they plan to
participate in mergers and acquisitions in the near future, but few
said they had clear integration strategies.

Companies continue to see mergers as a way to reduce costs through larger
size, and such deals appear "to be on the increase" in all areas of the technology
industry, according to a report released Monday by consulting company Arthur Andersen.

The report says that many companies enter into such deals without proper
consideration over how to
integrate the two companies and execute a combined business strategy. The report is
especially timely as telecom giants AT&T and WorldCom struggle after
large acquisitions.

Many respondents said "they could not continue to grow their businesses
without maintaining, or increasing, the extent of (merger and acquisition) activity," the report
said.

The key benefits in such tie-ups were listed as economies of scale, business growth,
increased global presence and technology acquisition, with 98 percent saying
the acquisition of talent was also important.

Seventy-six percent of executives surveyed said they were strongly inclined
to increase merger and acquisition activity.

However, 63 percent said that a recently concluded deal had led to a variety
of problems, from management difficulties to a drop in shareholder value.

One reason cited for problems was a lack of planning for the merger after
consummation. Sixty-five percent admitted they didn't have a plan to
execute in such a deal after it was planned, and three-quarters of the respondents admitted they didn't have an integration plan.

Mergers are most likely to fail during the integration process, the survey
said. Yet companies apparently fail to realize this, for it also said,
"Though top management is intimately involved in negotiating a transaction,
many times their focus shifts away from the transaction once a deal is
signed.

"The consequences of bad deals--for deal-makers, investors, employees and
advisors--can be dramatic," the study said, although it declined to cite any specific examples.

Arthur Andersen surveyed executives from telecom, media and entertainment
companies, including 31 companies in the United States and five abroad.